The Members of CEAT Limited
Your Directors are pleased to present their Fifty-Eighth report together with theStandalone and Consolidated Audited Financial Statements of the Company for the year endedMarch 31 2017.
|FINANCIAL HIGHLIGHTS || || |
|I. Standalone: || || |
| || ||` in Lacs |
|Particulars ||2016-17 ||2015-16 |
|Total Revenue ||641797.53 ||616481.77 |
|Total Expenses ||593799.94 ||552562.22 |
|Profit before Taxation ||46665.04 ||62779.56 |
|Tax expense: || || |
| Current Tax ||11444.94 ||15057.86 |
| Deferred Tax ||5789.80 ||3203.87 |
| MAT credit entitlement ||(6842.28) || |
|Profit for the period ||36272.58 ||44517.83 |
|Other Comprehensive Income: || || |
|Items that will not be reclassified to profit or loss || || |
| Actuarial losses for gratuity ||(483.99) ||315.53 |
| Income tax effect on actuarial losses for Gratuity ||167.50 ||(109.20) |
|Items that will be reclassified to profit or loss || || |
| Net Movement in cash flow hedges ||(377.10) ||(53.95) |
| Income tax effect on net movement in cash flow hedges ||130.51 ||18.67 |
|Total Comprehensive Income for the period ||35709.50 ||44688.88 |
|II. Consolidated: || || |
| || ||` in Lacs |
|Particulars ||2016-17 ||2015-16 |
|Total Revenue ||645992.96 ||617359.68 |
|Total Expenses ||600932.35 ||557531.76 |
|Profit before Taxation ||43728.06 ||58687.93 |
|Tax expense: || || |
| Current Tax ||11660.33 ||15308.60 |
| Deferred Tax ||5823.68 ||3425.32 |
| MAT credit entitlement ||(6842.17) ||- |
|Profit after tax non-controlling interest and share of profit from Joint Venture ||36115.46 ||43754.17 |
|Other Comprehensive Income: || || |
|Items that will not be reclassified to profit or loss || || |
| Actuarial losses for gratuity ||(416.05) ||280.87 |
| Income tax effect on actuarial losses for Gratuity ||164.51 ||(97.20) |
|Items that will be reclassified to profit or loss || || |
| Movement in cash flow hedges ||73.33 ||(53.95) |
| Income tax effect on net movement in cash flow hedges ||130.51 ||18.67 |
|Movement in foreign exchange fluctuation reserve ||(63.73) ||110.17 |
|Total Comprehensive Income for the period (after non-controlling interest) ||36004.03 ||44012.73 |
In the preparation of financial statements no treatment different from that prescribedin the relevant Accounting Standards have been followed.
During the year under review on consolidated basis your Company recorded net revenuefrom operations of
` 644130.10 Lacs with a growth of 4.81% over ` 614591.14 Lacs for the last fiscal.The Company recorded a net profit of
` 36115.46 Lacs a negative growth of 17.46% over net profit of
` 43754.17 Lacs of the last fiscal.
On standalone basis your Company recorded net revenue from operations of ` 637651.80Lacs with a increase of 4.21% over
` 611813.26 Lacs of the last fiscal. The Company recorded a net profit of ` 36272.58Lacs negative a decrease of 18.52% over net profit of ` 44517.83 Lacs of the last fiscal.
CEAT continued to be one of the fastest growing tyre Companies in India for a secondyear in a row with a four year Revenue CAGR of 5.3% and a four year PAT CAGR of 178.42%.
The calendar year 2016 was a challenging one for the world economy. Weak internationaltrade and subdued investment slowed world growth to its weakest pace since 2009. Economicactivity is projected to pick up in 2017 and 2018 especially in emerging markets. Eventhough the outlook is brighter this year heightened uncertainty about policy direction inmajor economies casts a shadow over the prospects of recovery.
Amid this challenging environment India has emerged amongst the fastest growing majoreconomies in the world. The Indian economy was expected to grow by more than 7.75% in FY2016-17 supported by strong government reforms the Reserve Bank of India's inflationfocus and benign global commodity prices. However the second half of FY 2016-17 witnesseda slowdown in growth primarily due to the demonetization impact and a sharp rise incommodity prices.
During FY 2016-17 overall sales growth remained buoyant for the Indian Automobileindustry with growth across all categories except Medium & Heavy Commercial vehicles.However exports continued to remain a cause of concern predominantly in the two-wheelersegment. The domestic vehicle sales grew by 7.4% while exports showed a negative growthof 7%. Domestic Passenger vehicles and two-wheelers grew by 9.16% and 7.54% respectively.The automotive industry production which grew by 8% during FY 2014-15 deceleratedto 2.3% in FY 2015-16. However structural tailwinds point to sustenance of this trend andan annual production growth of about 7% during FY 2016-17.
The domestic tyre industry was helped by the fall in input costs in the first halfspecially Natural Rubber prices which fell by 15% during 2016 and crude which was on adownward spiral in 2016. This led to some margin expansion in the first half of 2017.Growth in demand from the Original Equipment
Manufacturers (OEM) and the replacement market resulted in a positive growth in FY2016-17 over the previous year. However the revenues of the tyre industry was affected byunabated flow of cheap Chinese tyres in the country.
STATE OF COMPANY'S AFFAIRS
Adhering to its purpose of "Making Mobility Safer and Smarter. Every day."the Company continues its unwavering commitment to its adopted vision and strategy.
A validation of the sustained efforts that the Company has been putting in thisdirection was the No. 1 ranking in the J.D. Power 2017 India Original Equipment TyreCustomer Satisfaction Index (TCSI) Study released on March 28 2017. In this highlyacclaimed survey CEAT ranked highest in overall customer satisfaction with a score of893 (on a 1000-point scale).
During the year under review a total of 92 new products were launched across differentproduct categories. A breakthrough innovation in the form of Puncture Safe'motorcycle tyres was launched to address a key pain area of customers. The Company hasfiled a patent for the same. The Company increased its market share in the two-threewheeler and passenger car segment (motorcycle 26% to 30% and scooter 24% to 30% andPassenger Car Radials (PCR) 7% to 8.5%). In the Truck and Bus Radial (TBR) segment theCompany launched the "WIN Series" and grew by 15% in the TBR replacement market.During the year under review the Company continued its efforts for channel expansion ina bid to maximise customer reach. The Company's network currently caters to 600+ districtscomprising of more than 4500 dealers 250+ two-wheeler distributors 450+ franchisees-CEAT Shoppes and CEAT Hubs and more than 350 multi-brand outlets and shop-in-shops. In FY2016-17 the Company gained acceptance with premium brands in the OEM category viz. RoyalEnfield Himalayan Bajaj Vikrant Honda Navi and Tork in two-wheelers and Verna Refreshi10 refresh Renault Sedan/ SUV and Nissan SUV in the PC/UV category.
Exports however continue to remain a cause of concern primarily due to devaluation ofcertain currencies and overall global slowdown. The Company continues to work relentlesslyto improve its exports volumes.
In line with CEAT's purpose to make mobility safer and smarter the Company launchedits media campaign "It helps" for both passenger and motorcycle tyres. Thiscampaign is focussed on the issue of jaywalking on roads and communicates that CEAT'stwo-wheeler tyres have the best-in-class wet and dry grip which keep the rider safe.
Further in line with the Company's focus on improving road safety two online campaignsnamed #NoMoreFunny and
Drive Safe Dad Bobblehead were also launched. While the #NoMoreFunny campaign focusseson reducing the drunken driving the Bobblehead campaign is focussed on reducing theinstances of overspeeding on roads. Both of these campaign have gone viral in the onlinespace with over 1 million views each received on YouTube.
Several other marketing initiatives including Overdrive Kwid Drive from Delhi to ParisMTV Roadies MTV Chase the Monsoon and Mahindra Adventure were also undertaken. TheCompany also strengthened its brand association with cricket through a bat endorsement byAjinkya Rahane.
The Company also continued its journey of making the workplace safer cleaner andhealthier. The British Safety Council Sword of Honour received by Halol plant was avalidation of the Company moving in the right direction. Also all the plants of theCompany including the lastest Nagpur smart plant are ISO 140001 and OHSAS 18001compliant.
Favourable raw material prices a shift to the high margin non truck product portfolioand building of an extensive distribution network contributed to increased volumes andmargins for the Company during the first half of FY 2016-17. The second half howeverwitnessed pressure in margins due to the combined effect of demonetization and increase inthe raw material prices. The Company received an upgrade in its long term credit ratingfrom AA- to AA.
Considering the profits for the year under review and also the capital expenditurerequirements of the Company your Directors are pleased to recommend a dividend of ` 11.50per equity share of ` 10.00 each (i.e. 115%) for the financial year ended March 31 2017.
During the year under review the Company has adopted a Dividend Distribution Policyand the same is annexed herewith as "Annexure A".
TRANSFER TO RESERVE
Your Directors have proposed not to transfer any sum to the General Reserve.
MATERIAL CHANGES AND COMMITMENTS IF ANY AFFECTING THE FINANCIAL POSITION OF THECOMPANY:
There are no material changes and commitments affecting the financial position of theCompany which have occurred between the close of financial year on March 31 2017 to whichthe financial statements relates and the date of this Report.
During the year under review the Company completed the capacity expansion undertakenat its Halol Plant and ramped the capacity to 120MT/day. The Company also set-up a greenfield manufacturing plant at Nagpur with an initial capacity of 120 MT/day for manufactureof two-three wheeler tyres at a capital outlay of ` 420 Crores. Currently this facilityis ramped up to 66 MT/day and is expected to be ramped up to full capacity in the secondquarter of FY 2017-18.
Additionally the Company also proposes to set up an off-the-road tyre manufacturingcapacity through its wholly owned subsidiary CEAT Specialty Tyres Limited in two phasesinvolving a total capital outlay of ` 650 Crores. The first phase for 40MT/day capacityinvolving a capital expenditure of
` 330 Crores is expected to be completed by the third quarter of FY 2017-18.
The Company has also announced expansion projects for investment of approx. ` 2800crores over a period of 5 (five) years up to FY 2021-22 through capacity addition at itsplants at Halol (Truck Bus Radial capacity of 208 tonnes/day) and Nagpur (two-wheelercapacity of 140 tonnes/day) and investment in a greenfield capacity of 150 tonnes/day formanufacture of PCR.
According to reports by research agencies India could grow at a potential of 7.7 - 8 %during the period 2016 to 2020 powered by greater access to banking technology adoptionurbanisation and other structural reforms.
According to ICRA domestic tyre demand is expected to grow by 6-7% over the nexttwo-three years ending FY 2018-19 supported by a broad based revival in OriginalEquipment (OE) demand and economic activity in the country. Pick up in rural expenditurewith good monsoon would translate into higher OEM demand for the rural centric two-wheelerand tractor segments. Growing fleet on ground and higher miles driven/ freight moved woulddrive replacement sales. The future outlook of the tyre industry is therefore expected tobe stable.
The Company expects to continue the growth path gaining share in the two-wheelerpassenger car and utility vehicles segment. It also expects to increase its market sharein the TBR segment. The Company shall continue to focus on increasing capacitiesenhancing brand visibility new product development and service innovation.
At the end of the year under review the Company had following four subsidiaries namelyCEAT Specialty Tyres Limited Mumbai
(CSTL) Rado Tyres Limited Cochin (RTL) Associated CEAT Holdings Company (Private)Limited Colombo Sri Lanka (ACHL) CEAT AKKhan Limited Dhaka Bangladesh (CAL).
The Company does not have any material subsidiary whose net worth exceeds 20% of theconsolidated net worth of the holding company in the immediately preceding financial yearor has generated 20% of the consolidated income of the Company during the previousfinancial year. A policy on material subsidiaries has been formulated by the Company andposted on the website of the Company at the link http://www.ceat.com/Investors_intimation.aspx
CEAT Specialty Tyres Limited
CEAT Specialty Tyres Limited (CSTL) a wholly owned subsidiary of the Company isengaged in manufacturing and sale of tyres for off-the-road vehicles/ equipment whichfind application across industries including ports construction mining and agriculture.During the year under review CSTL commenced setting up of its green field facility atAmbernath in the State of Maharashtra with an initial capacity of 40 MT/ day which wouldsubsequently be ramped up to 100 MT/day in the next phase. The commercial production fromthis facility is expected from the second quarter of the current fiscal.
During the year under review CSTL registered a revenue of
` 22417.23 Lacs (Previous year ` 10251.39 Lacs) and a net loss of ` 1003.22 Lacs inFY 2016-17 (Previous year ` 1197.58 Lacs) through its trading operations in Off- Highwaytyres.
Rado Tyres Limited
Rado Tyres Limited (RTL) having its two-three wheeler tyres manufacturing capacity atCochin currently supplies its entire production of automotive tyres (two-three wheeler)to the Company. During the year under review RTL registered a revenue of ` 898.06 Lacs ascompared to a revenue of
` 1201.40 Lacs in FY 2015-16 registering a deficit of 25.25%. The net loss for theyear under review has however gone up to
` 124.39 Lacs from ` 108.05 Lacs in the previous year mainly due to labour unrestduring September to November 2016 claiming higher bonus. The production tickets for FY2016-17 have also being lower than previous year.
Details of ACHL and CAL are given below under the heads "Joint Venture in SriLanka" and "Joint Venture in Bangladesh".
JOINT VENTURE IN SRI LANKA
ACHL the Company's investment arm in Sri Lanka has a 50:50 joint venture company viz.CEAT-Kelani Holdings Private Limited which operates four manufacturing plants through itswholly owned subsidiaries in Sri Lanka.
During the year under review ACHL has registered a revenue/ lower revenue of LKR47053.31 Lacs (`21406.24 Lacs) as compared to LKR 46338.21 Lacs (`21843.83 Lacs) in FY2015-16. However the profit after tax has reduced by 20.99% to LKR 6235.46 Lacs(`2836.75 Lacs) as compared to LKR 7891.76 Lacs (`3617.93 Lacs) in FY 2015-16. ACHL'sjoint venture continues to enjoy the overall market leadership in all categories of tyresin Sri Lanka.
ACHL has been consistently paying dividends and it has during the year under reviewpaid a dividend of `1639.23 Lacs to the Company.
JOINT VENTURE IN BANGLADESH
CEAT AKKhan Limited (CAL) is the 70:30 joint venture (JV) of the Company inBangaldesh. CAL is setting up a green field facility for manufacture of automotive biastyres in Bangladesh. CAL has been selling CEAT branded automative tyres outsourced fromthe Company in the local market since the last 3 (three) years. For the year under reviewthe revenue of CAL is BDT 6586.07 Lacs (`5618.58 Lacs) as compared to BDT 6613.77 Lacs(` 5541.02 Lacs) in FY 2015-16. The net loss for the year under review is BDT 521.98 Lacs(` 469.94 Lacs) as compared to the net loss of previous year BDT 594.92 Lacs ( `435.50 Lacs).
A report on the performance and financial position of each of the Company's aforesaidsubsidiaries forms part of the Annual Report.
CONSOLIDATED FINANCIAL STATEMENTS
In accordance with Section 129(3) of the Companies Act 2013 and Regulation 34(2) ofSEBI (Listing Obligations and Disclosure Requirement) Regulations 2015 the ConsolidatedFinancial Statements of the Company including the financial details of all the subsidiarycompanies of the Company forms part of this Annual Report. The Consolidated FinancialStatements have been prepared in accordance with the Indian Accounting Standards issued bythe Institute of Chartered Accountants of India.
BUSINESS RISK MANAGEMENT
Pursuant to the requirement of Regulation 21 of SEBI (Listing Obligations andDisclosure Regulations) Regulations 2015 the Company has constituted a Risk ManagementCommittee. The details of this Committee and its terms of reference are set out in theCorporate Governance Report which forms part of this Report.
The Company has in place a Business Risk Management framework to identify risks andminimize their adverse impact on business and strives to create transparency which in turnenhances the Company's competitive advantage.
Pursuant to the aforesaid business risk framework the Company has identified thebusiness risks associated with its operations and an action plan for mitigation of thesame is in place. The business risks and its mitigation have been dealt with in theManagement Discussion and Analysis section of this Report.
CORPORATE SOCIAL RESPONSIBILITY
The Board of Directors has formed a committee on Corporate Social Responsibility (CSR)in accordance with Companies Act 2013. The composition of the same has been given inCorporate Governance Report.
The Company with a vision to drive holistic empowerment' of the community hascarried out the following CSR initiatives through RPG Foundation ("the Trust")a public charitable trust qualified to undertake CSR activities in accordance withSchedule VII of the Companies Act 2013:
Netranjali The project aims at providing comprehensive Vision/Eye care toprevent avoidable blindness. During the year 840310 under-privileged in three targetgroups viz. elderly truckers and children were educated on eye care. The project screened120645 people through 935 Eye Camps distributed over 54685 spectacles and made 13685referrals for severe cases.
Swayam The project aims to promote Gender Equality and Women's Empowermentand drive powerful social change in the transport industry by training underprivilegedwomen in driving skills to enhance livelihood across sectors such as Taxi school vans andentrepreneurial ventures and covered 17 locations by completing 57 training batches.
Road Smarrt - In line with the motto of safety the Company launched "RoadSmarrt" to advocate safe driving and prevention of road fatalities. The Companytargeted school children and parents to create awareness amongst children who are thefuture road users. The Company launched sessions in 20 schools in Mumbai covering over10000 children.
Pehlay Akshar - The project focuses on Primary Education with emphasis on Englishspeaking and reading skills to enhance employability. During the year the project covered30 schools and trained 290 teachers impacting 35000 students. Further the initiativereached out to 2912 students across 26 schools in Mumbai Halol and Nashik.
JeevanTheprojectfocusesonimprovingqualityoflifeinareas of clean drinkingwater sanitation and health and nutrition. The project provided nutritional support andsafe drinking water in schools and installed rain harvesting structures. Further insupport of the Swachh Bharat Abhiyan sanitation facilities were provided throughconstruction of toilets in the communities around the Company's plants.
Employability- Skill Development (Project-Saksham)/ (Project Sanjeevani) These two projects are skill development programs which focuses on alternate livelihoodstraining for empowering women and technical training to youth.
Saksham- During the year under review 155 less privileged women andyouths were trained in tailoring entrepreneurship mobile phone repairing and preparingnutritional snacks.
Sanjeevani- The project trained 182 less privileged women and youthsin patient care assistance as an alternate livelihood option in the communities around theCompany's plants.
The Annual Report on CSR activities in pursuance of the Companies (Corporate SocialResponsibility Policy) Rules 2014 is annexed herewith as "Annexure B".
The Company has spent the entire amount of ` 1011 Lacs towards CSR activities duringthe FY 2016-17.
VIGIL MECHANISM /WHISTLE BLOWER POLICY
Pursuant to Section 177 of the Companies Act 2013 and Regulation 22 of SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 the Board has adopted vigilmechanism in the form of Whistle Blower Policy to deal with instances of fraud ormismanagement if any. The Policy can be accessed at the website of the Company at linkhttp://www. ceat.com/Investors_intimation.aspx.
RELATED PARTY TRANSACTIONS
The Company has formulated a policy on Related Party Transactions for purpose ofidentification and monitoring of such transactions. The said policy on Related PartyTransactions as approved by the Board is uploaded on the Company's website.
All Related Party Transactions are placed before the Audit Committee and wherevernecessary before the Board/ members for approval. The related party transactions enteredduring the financial year were on an arm's length basis and in the ordinary course ofbusiness except the contracts/arrangements or transactions entered into by the Companywith related parties referred to in sub-section (1) of Section 188 of the Companies Act2013 during the course of business but which were not at arm's length basis. The detailsof the same are annexed herewith as "Annexure C" in the prescribed FormAOC-2.
The paid up equity capital of the Company as on March 31 2017 was ` 4045.01 Lacs. Thesaid shares are listed on the BSE Limited and the National Stock Exchange of IndiaLimited. There is no change in the paid-up capital of the Company during the year underreview.
The Company during FY 2015-16 had issued and allotted 2000 Secured RedeemableNon-Convertible Debentures of ` 10 Lacs each on private placement basis aggregating to
` 20000 Lacs. The said Secured Redeemable Non-Convertible Debentures are listed on BSElimited.
Your directors are pleased to inform you that during the year under review the longterm credit rating of the Company improved from "AA-" to "AA" with"Stable" outlook by its rating agencies viz. CARE and India Ratings (Fitch). Therating of AA indicates high degree of safety regarding timely servicing of financialobligations and very low credit risk. A Stable' outlook indicates expected stability(or retention) of the credit ratings in the medium term on account of stable credit riskprofile of the entity in the medium term.
The short term facilities of the Company have been granted the rating of A1+ by CAREand India Ratings (Fitch). The rating of A1+ indicates very strong degree of safetyregarding timely payment of financial obligations and carries the lowest credit risk.
EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in the prescribed FormMGT-9 is annexed herewith as "Annexure D".
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO
A statement giving details of conservation of energy technology absorption foreignexchange earnings and outgo in accordance with Section 134(3)(m) of the Companies Act2013 read with Rule 8 of The Companies (Accounts) Rules 2014 is annexed hereto as "AnnexureE" and forms part of this report.
PARTICULARS OF EMPLOYEES
The statement required pursuant to Section 197 read with Rule 5 of The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 ("the saidRules") in respect of employees of the Company are required to be set out in thisreport. However the second proviso of the sub rule (3) of Rule
5 of the said Rules permits the Company to provide the said statement on specificrequest of member in writing. Therefore the Annual Report excluding the said statement isbeing sent to all the members of the Company and such statement shall be made available tothe members on request.
The prescribed particulars of employees required under Section 134(3)(q) and Rule 5(1)of the said Rules are attached as "Annexure F" and forms part of thisreport.
During the year under review your Company discontinued the Fixed Deposit Scheme andrepaid all the outstanding fixed deposits along with interest accrued up to September 302016.
Hence there are no deposits outstanding as on March 31 2017. There were no defaultsin respect of repayment of any deposits or payment of interest thereon during the yearunder review. The Company has not accepted any deposits which are not in compliance withthe requirements of the Act.
The Company has no overdue deposits other than the unclaimed deposits as at the end ofthe year under review.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
In terms of Section 134 (3) (g) the Report of the Board of Directors shall include thedetails of particulars of Loans Guarantees and Investments under Section 186 of theCompanies Act 2013 which are provided in the notes to the Financial Statements. Theloans and/or advances given to the employees bear interest at applicable rates.
Messrs Vinay Bansal Atul C. Choksey S. Doreswamy Mahesh S. Gupta Haigreve KhaitanRanjit V. Pandit and Paras K. Chowdhary and Ms. Punita Lal are Independent Directors onthe Board of the Company and the composition of the Board of Directors duly meets thecriteria stipulated in Section 152 of the Companies Act 2013.
All Independent Directors have given declarations that they meet the criteria ofindependence as laid down under Section 149(6) of the Companies Act 2013 and Regulation16 of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.
During the year under review Mr. K. R. Podar Independent Director of the Companyceased to be a Director of the Company with effect from February 9 2017 because ofresignation from the Board due to health reasons.
The Board at its meeting held on March 22 2017 considered and approved there-appointment of Mr. Anant Vardhan Goenka as Managing Director for a period of 5 (five)years w.e.f April 1 2017 to March 31 2022 subject to the approval of the members at theFifty-Eighth Annual General Meeting of the Company.
In accordance with the Companies Act 2013 and Articles of Association of the CompanyMr. H. V. Goenka retires by rotation and being eligible offers himself for re-appointment.
PECUNIARY RELATIONSHIP OR TRANSACTIONS OF THE NON-EXECUTIVE DIRECTORS AND DISCLOSURESON THE REMUNERATION OF THE DIRECTORS
All pecuniary relationship or transactions of the Non-Executive Directors vis--visthe Company along with criteria for such payments and disclosures on the remuneration ofthe Directors along with their shareholding are disclosed in Form MGT-9 which forms a partof this Report.
KEY MANAGERIAL PERSONNEL
During the year under review Mr. Kumar Subbiah was appointed as the Chief FinancialOfficer with effect from January 16 2017 in place of Mr. Manoj Kumar Jaiswal. Ms. ShrutiJoshi was appointed as the Company Secretary with effect from September 1 2016 in placeof Mr. H. N. Singh Rajpoot. The Company has appointed Mr. Arnab Banerjee as the Whole-timeDirector designated as the Executive Director-Operations. The Board at its meeting heldon March 22 2017 approved the re-appointment of Mr. Anant Vardhan Goenka as ManagingDirector for a further period of 5 (five) years with effect from April 1 2017 subject tothe approval by the shareholders at the ensuing Annual General Meeting.
The above are the Key Managerial Personnel of the Company pursuant to the provisionsof Section 203 read with Section 2(51) of the Companies Act 2013.
INTER-SE RELATIONSHIPS BETWEEN THE DIRECTORS
There are no relationships between the Directors inter-se except between Mr. AnantVardhan Goenka Managing Director and Mr. H. V. Goenka Chairman. Mr. Anant Vardhan Goenkais the son of Mr. H. V. Goenka Chairman.
FAMILIARIZATION PROGRAMME FOR INDEPENDENT DIRECTORS
Pursuant to the Code of Conduct for Independent Directors specified under the CompaniesAct 2013 and requirements of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 the Company has framed a familiarisation programme for all itsIndependent Directors to familiarize them on their roles rights and responsibilities inthe Company the nature of the industry in which the Company operates and its businessmodel. The familiarisation programme posted on the website of the Company at the linkhttp://www.ceat.com/ Investors_intimation.aspx.
POLICY ON APPOINTMENT TRAINING EVALUATION AND REMUNERATION OF DIRECTORS KEYMANAGERIAL PERSONNEL AND SENIOR MANAGEMENT PERSONNEL
The Board has on the recommendation of the Nomination and Remuneration Committeeframed a policy on Appointment Training Evaluation and Remuneration of Directors KeyManagerial Personnel and Senior Management Personnel (SMP) and their remuneration whichis enclosed as "Annexure G".
EVALUATION OF BOARD ITS COMMITTEES AND DIRECTORS
For the purpose of evaluation the Board had finalised a questionnaire and engaged athird party to conduct an independent online confidential survey using the saidquestionnaire. The results of the survey/feedback were then deliberated at Board Meetingand evaluation of the Board its Committees and the Directors were reviewed.
MEETINGS OF THE BOARD OF DIRECTORS
During the year 6 (Six) Board Meetings were convened and held. The details of whichare given in the Corporate Governance Report. The intervening gap between the meetings waswithin the period prescribed under the Companies Act 2013 and Regulation 17 of SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015.
Detailed composition of the mandatory Board Committees viz. Audit Committee Nominationand Remuneration Committee Stakeholders' Relationship Committee Corporate SocialResponsibility Committee Risk Management Committee and non-mandatory committee viz.Finance and Banking Committee and Special Investments/Project Committee number ofmeetings held during the year under review and other related details are set out in theCorporate Governance Report which forms a part of this Report.
There have been no situations where the Board has not accepted any recommendations ofthe Audit Committee.
The Company has formed Audit Committee and composition of the same has been given inCorporate Governance Report.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to Section 134(3)(c) of the Companies Act 2013 your Directors to the bestof their knowledge and belief make following statements that: i. The applicableAccounting Standards have been followed in the preparation of the annual accounts alongwith the proper explanation relating to material departure if any.
ii. Such accounting policies have been selected and applied consistently and suchjudgements and estimates have been made that are reasonable and prudent so as to give atrue and fair view of the state of affairs of the Company in the Balance Sheet as at March31 2017 and the Statement of Profit and Loss for the said financial year ended March 312017.
iii. Proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities.
iv. The annual accounts have been prepared on a going concern basis.
v. The proper internal financial controls were in place and that such internalfinancial controls are adequate and were operating effectively.
vi. The systems to ensure compliance with the provisions of all applicable laws were inplace and that such systems were adequate and are operating effectively.
MANAGEMENT DISCUSSION AND ANALYSIS AND CORPORATE GOVERNANCE REPORT
In compliance with the Regulation 34 of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 separate section on Management Discussion and Analysisas approved by the Board of Directors which includes details on the state of affairs ofthe Company forms part of this Annual Report. Further the Corporate Governance Reportduly approved by the Board of Directors together with the certificate from the StatutoryAuditors confirming the compliance with the requirements of SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 forms part of this Annual Report.
BUSINESS RESPONSIBILITY REPORT
In compliance with the Regulation 34 of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 a separate section on Business Responsibility Report asapproved by the Board which includes principles to assess compliance with environmentalsocial and governance norms for the year under review forms part of the Annual Report.
The Company at its AGM held on September 26 2014 had appointed Messrs S R B C & COLLP as the Statutory Auditors for a period of 3 (three) consecutive years from theconclusion of the Fifty-Fifth Annual General Meeting to the conclusion of the Fifty-EightAnnual General Meeting subject to ratification of their appointment by the members everyyear. Further the first term of the appointment of Statutory Auditors expires at theconclusion of Fifty-Eight Annual General Meeting and pursuant to the provisions of Section139 (2) (b) an audit frim can be appointed for two terms of five consecutive years.Accordingly statutory auditors have confirmed that their appointment for a further termof 5 (five) years if approved at the ensuing Annual General Meeting would be incompliance with Sections 139 and 141 of the Companies Act 2013.
The Board has appointed Messrs KPMG as Internal Auditors for the period of 1 (one) yearup to March 31 2018 under Section 138 of the Companies Act 2013 and they have completedthe internal audit as per the scope defined by the Audit Committee.
The Company has appointed Messrs Parikh and Associates Company Secretaries to conductthe Secretarial Audit for the financial year ended March 31 2017 as required by Section204 of the Companies Act 2013 and rules made thereunder. The Secretarial Audit Reportfurnished by Messrs Parikh and Associates is annexed to this report as "AnnexureH".
The Board of Directors has appointed Messrs D. C. Dave & Co. Cost Accountants asCost Auditors of the Company for FY 2017-18 and recommends ratification of theirremuneration by the Members at the ensuing Annual General Meeting.
EXPLANATION AND COMMENTS ON AUDITORS AND SECRETARIAL AUDIT REPORT
There is no qualification disclaimer reservation or adverse remark made either by theStatutory Auditors in Auditors Report or by the Company Secretary in practice (SecretarialAuditor) in the Secretarial Audit Report.
The Statutory Auditors have not reported any instances of fraud to the CentralGovernment and Audit Committee as per the provisions of Section 143 (12) of the CompaniesAct 2013 read with Rule 13 of the Companies (Audit and Auditors) Rules 2014.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALSIMPACTING THE GOING CONCERN STATUS
There are no significant and material orders passed by the Regulators or Courts orTribunals impacting the going concern status and Company's operations in future.
CHANGE IN THE NATURE OF BUSINESS
During the year under review there was no change in the nature of the business.
INTERNAL FINANCIAL CONTROL
Details in respect of adequacy on internal financial controls with reference to theFinancial Statements are stated in Management Discussion and Analysis which forms part ofthis Annual Report.
CEAT continues to be a people focused organization continuously building nextgeneration leadership.
One of the main enablers of achieving CEAT vision 2016-2021 is Unleashing Talent whichemphasizes on people focus of the organization. The Company has increased its investmentand capacity in training and development to develop people to their maximum potential.Focus on training and development continued through a combination of functional technicaland behavioral training programs adding up to 3.2 man-days per employee of training in FY2016-17. The Company has been persistent on achieving process and quality excellence bybuilding internal academies and involving employees at the grass-root level in continuousimprovement through Total Quality Management (TQM) initiatives.
DISCLOSURE UNDER SEXUAL HARRASEMENT OF WOMEN AT THE WORKPLACE (PREVENTION PROHIBITIONAND REDRESSAL) ACT 2013.
In accordance with the provisions of the Sexual Harassment of Women at the Workplace(Prevention Prohibition and Redressal) Act 2013 4 (four) Internal Complaints Committees(ICC) have been set up to redress complaints. During the year under review 2 (two)complaints were received and resolved satisfactorily.
Your Directors place on record their appreciation for the continued support andco-operation received from the Employees Customers Suppliers Dealers FinancialInstitutions Banks and Members towards conducting the business of the Company during theyear under review.
|On behalf of the Board of Directors |
|H. V. Goenka |
|Place: Mumbai |
|Date: April 28 2017 |
DIVIDEND DISTRIBUTION POLICY
I Introduction and Objective:
Regulation 43A of the Securities Exchange Board of India ("SEBI") (ListingObligations and Disclosure Requirements) Regulations 2015 (the ListingRegulations') mandates top 500 listed entities determined on the basis of their marketcapitalization calculated on March 31 of every financial year to formulate a DividendDistribution Policy.
In compliance with Regulation 43A of the Listing Regulations the Company has framedthis Dividend Distribution Policy.
This Policy aims to help the investors and Stakeholders in their investing decisionsand shall be effective from the date of adoption of the same by the Board of Directors ("theBoard").
II Regulatory Framework:
The Dividend if any declared by the Company (including Interim Dividend) shall begoverned by the provisions of the Companies Act 2013 read with the Companies (Declarationand Payment of Dividend) Rules 2014 the Listing Regulations and the provisions ofArticles of Association of the Company as in force from time to time (hereinaftercollectively referred as "Applicable Laws").
III Parameters/factors to be considered for declaration of dividend A General:
The Board shall recommend dividend only if it is of the opinion that it isfinancially prudent to do so.
B Financial and Internal Parameters:
The Board would consider the following financial parameters before declaring interimdividend or recommending a final dividend to shareholders for declaration:
Stand-alone net operating profit after tax;
Working capital requirements;
Operating expenditure requirements including loan repayments and interestpayments;
Capital expenditure requirements;
Resources required to fund acquisitions and inorganic growth;
Cash to be retained for business needs;
Cash flow required to meet contingencies;
Outstanding borrowings and total debt equity ratio;
Past dividend payment trends of the Company and dividend track record;
Total Cash outflow including tax payments;
Extra-ordinary income/profits by the Company arising from transactions such assales of land or undertaking;
Tax impact of the dividend and the cash outflow post tax.
The Board shall also consider the following internal factors while declaring an interimdividend or recommending a final dividend to the shareholders:
Business Strategy of the Company
Scheme of arrangement or any other item which can have a financial impact on theCompany
Unforeseen events and contingencies with financial implications
C External Parameters:
The Board shall also consider inter alia the following external factors i.e.factors on which the Management or the Company has no control while declaring an interimdividend or recommending a final dividend:
Regulatory restrictions if any or the prevalent statutory requirements
Provisions of Tax laws governing dividend
Dividend Pay-out ratios of Peers
Economic environment and state of the capital markets
Change in Government Policy which can have a financial impact on the Company
Commodity price impact on the business
Cyclical nature of industry/business
Need to maintain competitiveness of the Company and its business
IV Circumstances under which the shareholders may or may not expect dividend:
The Company has been consistently paying out dividends to its shareholders and can bereasonably expected to continue in future as well unless the Company is restrained todeclare dividend due to insufficient profits or due to any of the external or internalfactors listed above.
Further though the Company endeavors to declare the dividend to the shareholders theBoard may propose not to recommend dividend after analysis of various financial parametersincluding those listed above cash flow position and funds required for future growth andcapital expenditure or in case of a proposal to utilize excess cash for buy-back ofexisting share capital.
V Policy as to how the retained earnings shall be utilized:
The profits being retained in the business shall be continued to be deployed inbusiness for meeting the operating expenses capital expenditure augmentation of workingcapital including servicing of term loans cash outflow for business growth and potentialacquisition if any thus contributing to the growth of business and operations of theCompany.
The Company stands committed to deliver sustainable value to all its stakeholders.
VI Parameters that shall be adopted with regard to various classes of shares:
The holders of the Equity Shares of the Company as per the Issued and Paid-up capitalon the record date are entitled to receive dividends.
The other classes of shares for e.g. Preference Shares or Shares with differentialvoting rights will be governed by the terms of issue of such shares.
Any convertible instruments issued by the Company shall be entitled for dividend onlyupon conversion.
VII Procedure with respect to dividend:
The Board upon perusing the rational for proposed pay-out may recommend a finaldividend or declare an interim dividend.
The final dividend recommended by the Board is subject to declaration by theshareholders in the ensuing Annual General Meeting.
The interim dividend declared by the Board shall be placed for confirmationbefore the shareholders in the ensuing Annual General Meeting.
The CFO may in consultation with the MD shall also recommend to the Boardtransfer of such percentage of profits for that financial year as deemed appropriate tothe reserves of the Company and the Board may decide on the same.
In case of inadequacy of profits for any financial year the Board may approvedeclaration of dividend out of accumulated profits of the previous years as per thisPolicy and the Regulatory Framework.
The Company shall make appropriate disclosures as required under the SEBI Regulationsand the Companies Act 2013.
The Board reserves the right to amend this Policy in whole or in part at any point oftime as may be deemed necessary.
It is hereby clarified that provisions of the Applicable Laws shall prevail over theprovisions of this Policy to the effect necessary amendments in the Applicable Laws havenot been carried out in this Policy. setting up homes and hostels for women and orphanssetting up old age homes day care centres and such other facilities for senior citizensand measures for reducing inequalities faced by socially and economically backward groups;
(iv) Ensuring environmental sustainability ecological balance protection of flora andfauna animal welfare agro-forestry conservation of natural resources and maintainingquality of soil air and water.
Web-link: http://www.ceat.com/Investors%20_ intimation.aspx
2. The Composition of the CSR Committee.
Mr. Anant Vardhan Goenka Chairman (Managing Director) Mr. Vinay Bansal (IndependentDirector) Mr. Hari L. Mundra (Non-Executive Non Independent Director)
3. Average net profit of the company for last three financial years: ` 50518.10 Lacs
|Computation of Profit for CSR || |
Amount (` In Lacs)
|1. Net profit as per section 198: || || |
| FY 2013-14 ||40131.12 || |
| FY 2014-15 ||46516.18 || |
| FY 2015-16 ||64353.84 ||151001.14 |
|2. Average Net Profit of last 3 years || ||50333.71 |
|3. Funds to be allocated for CSR || ||1006.67 |
4. Prescribed CSR Expenditure (2% of the amount as in item 3 above): ` 1006.67 Lacs
5. Details of CSR spent during the financial year. a. Total amount to be spent for thefinancial year;
` 1011 Lacs b. Amount unspent if any; NIL c. Manner in which the amount spent duringthe financial year is detailed below.